The narrative outside of Europe about Europe’s fiscal crisis is wrong

THE Brazilian Finance Minister Guido Mantega spoke for many emerging markets in April when he fumed against, “countries responsible for the deepest crisis since the Great Depression…eager to prescribe codes of conduct to the rest of the world”. Mr Mantega might be pleasantly surprised by a Bank of International Settlements paper on central banks and financial stability, which holds up emerging markets as a model for the developed world.

Everyone says Europe has a debt crisis. But does it not instead have a morality crisis?What I mean is that, technically speaking, there are lots of possible solutions to the problem, such as some mix of:

Everyone at the conference seemed to like this model of endogenous banking crises (me included -- this is the non-technical summary, the paper itself is fairly technical):

By Shareholders Unite:In essence, the eurozone crisis is a balance of payments crisis, engendered by the introduction of the euro itself. This created misalignments (the loss of competitiveness in the periphery) and removed ways to deal with them.However, there is some automatic correction to these misalignments going on. It will take a long time to run its course, and there is a lot that can go wrong in the meantime, but at least there is a ray of hope.

Today, we're fortunate to have a guest contribution by Jeffry Frieden, Stanfield Professor of International Peace at Harvard University, and coauthor of Lost Decades: The Making of America's Debt Crisis and the Long Recovery.

Last week I participated in a conference hosted by the Federal Reserve Bank of Boston, at which I discussed the new lending programs and asset acquisitions pursued by the Federal Reserve over the last two years. Previously I shared with Econbrowser readers empirical evidence on the effects these targeted liquidity operations seem to have had.